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Russell Takes Small-Caps +2.7% on the Day

We began this trading day with news that the Securities & Exchange Commission (SEC) wasn’t done going after crypto-world, with its lawsuit filed against trading platform Coinbase COIN not a full day after the SEC also filed suit against crypto exchange Binance. The SEC believes both companies have conducted business outside their designated capacities in the U.S., and are turning to the judicial system for recompense. Ah, the joys of fledgling currency markets!

Thus, the opening bell struck with all four major indices mired slightly in the red. But apparently, what’s potentially bad for the crypto market can be a boon for equities — especially of the small-cap variety: the Russell 2000 shot out of the gate this morning, closing near session highs to +2.70% for the day. The other three major indices also notched gains by today’s close: the Dow finished flat at +0.03%, the S&P 500 netted +0.24% and the tech-heavy Nasdaq, which has been the big market winner thus far in 2023, grew +47 points, +0.36%.

Part of this is the small-cap Russell playing catch-up with the S&P and particularly the Nasdaq; only the Dow has underperformed the small-cap index year-to-date. As it is, however, we’re in the green across the board for the year so far, largely thanks to Friday’s big relief rally that, among other things, saw a raised debt ceiling passed and our escape from Q1 earnings season without witnessing a deep recession on the near-term horizon.

The overall lukewarm trading today makes sense, as we have little on which to pivot earnings-wise or economic report-wise, either today or all week. We did see S&P PMI and ISM Services results yesterday and Trade Deficit and Consumer Credit numbers are due out tomorrow, but these are not main inflation indicators that might cause the Fed to reflect differently on their current position whether or not to keep raising interest rates. As it stands, most analysts still expect the Fed to pause at the current 5.25-5.50% Fed funds rate next week — already the highest we’ve seen in 15 years.

Next week will be a different story: Consumer Price Index (CPI) and Producer Price Index (PPI) reports are due Tuesday and Wednesday, the same two days of the next Fed meeting. We’ll also see Retail Sales, Import and Export Prices, Empire State and Philly Fed surveys and the minutes of the previous Fed meeting all on display, which will give us a clearer depiction of where domestic inflation lay presently. Simply the Fed decision alone will potentially bring a bigger impact to markets than anything on our socket for the remainder of this week.

Editor’s note: Beginning tomorrow, and through the Juneteenth holiday on the 19th of this month, Ahead of Wall Street will be captained by a capable editor other than myself. Perhaps they’ll be able to find something more useful in this quiet week in market activity (so far).

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